As Israeli leaders on Sunday threatened a harsh military response to continued rocket attacks, Palestinian Authority and Hamas leaders were said to be close to reaching a Gaza cease-fire deal in talks with Egyptian officials in Cairo.
Meanwhile, the IAF struck rocket-launching areas in northern Gaza on Sunday night, as well as a Hamas security building in central Gaza.
The targets attacked include six smuggling tunnels and a Hamas outpost, the government said in a statement.
IAF jets also bombed the Gaza-Egypt border area, where Hamas is known to have smuggled weapons through tunnels.
There were no immediate reports of casualties, but Palestinian sources reported huge explosions in the area.
Prime Minister Ehud Olmert promised a "harsh" and "disproportionate" response to the renewal of rocket fire into Israel when he addressed the cabinet on Sunday, shortly after a rocket hit near a kindergarten in the Eshkol region.
"The cabinet's position from the outset was that if firing continues against residents of the South, there will be a sharp Israeli response that would be disproportional vis-Ã¡-vis the firing," he said.
During the day, five Kassam rockets and eight mortar shells struck the western Negev, wounding three people in the Sha'ar Hanegev region - two soldiers and a civilian.
PA President Mahmoud Abbas was in Cairo to discuss arrangements to reopen the Rafah crossing between Sinai and Gaza, "with the anticipation of the Palestinian Authority managing the traffic through the crossing point," an Egyptian official told The Jerusalem Post.
"We are still working to achieve a quick and sustainable cease-fire," the official added.
Defense Minister and Labor Party leader Ehud Barak accused his political rival Foreign Minister Tzipi Livni of Kadima of talking "rubbish" and seeking a news headline when she urged a harsh military response to the continued Gazan rocket fire.
"It is the election season, and we see on one side that people who have never held a weapon and have never taken a real decision are talking rubbish and generating headlines without understanding the conditions or the factors that would influence how we should act," Barak told the cabinet.
Barak did not name the Kadima party head in his comments, which were understood as an attack on Livni.
Barak, Livni and Likud party leader Binyamin Netanyahu are all vying to replace Prime Minister Ehud Olmert in next week's election, and all three weighed in on the issue of Gaza on Sunday.
Netanyahu called on the government to act swiftly and harshly against the rocket fire and said it would be a mistake to return to the "weak policy of restraint" that characterized the Kadima-Livni government.
But Livni shot out with her own militant comments, when she told the cabinet that if the Palestinians in Gaza "fire on us, we have to renew military activity."
"We need to use strength, and a lot of it. In my opinion, there is no reason to wait. We need a response and an immediate one," Livni said.
But Barak urged caution, even as he said that the Defense Ministry was preparing a response.
"We will respond in the right way to what is happening in the Gaza Strip. The professionals under my guidance will formulate a correct response, but we have to act with discretion and responsibility. Hamas was dealt a severe blow and it will be dealt one again, but the decision needs to be made by the experts," he said.
The two were also at odds over the cease-fire talks scheduled to take place on Monday in Cairo between Egypt, Hamas and the PA, which could stop the rocket fire for at least a year.
Livni said such talks were a mistake.
"There are those sitting with the Hamas regime who want to reach understandings with the group, and there are those working to bring an end to the Hamas regime," she told the cabinet ministers. "A settlement with Hamas would give it legitimacy, and those working for that with the Egyptians need to understand that."
But Barak said there was no option but for Egypt to pursue such negotiations.
Israel, he said, would not be reaching an agreement with Hamas, but Cairo had an important role to play in its conversations with the Islamist group. Egypt did not ask permission from Israel before it negotiated with different groups, he said.
Only Egypt, along with the international community, could deal with the arms smuggling and accelerate the return of IDF soldier St.-Sgt. Gilad Schalit, Barak said.
The only other option, he said, was to occupy Gaza and to stay there for years.
"Anyone who thinks otherwise is delusional or disconnected from reality," he said.
Arab media reports on Sunday indicated that Hamas might be closer to accepting a truce with Israel.
One Arab television network reported that Hamas was willing to accept a truce in exchange for opening the crossing to Sinai.
According to the Saudi Arabia-based Al-Arabiya satellite network, Abbas will discuss a proposal to open the Rafah crossing on Thursday that will coincide with the announcement of a one-year truce between Israel and Hamas.
Hamas has agreed to allow the PA to manage the crossings with the presence and coordination of Hamas observers, Al-Arabiya reported. If true, this would represent a major breakthrough in Egyptian-mediated negotiations.
Egyptian Foreign Ministry spokesman Hossam Zaki said he could not confirm the Al-Arabiya report, adding that he would not comment on anything that would jeopardize the negotiations with Hamas.
The full Hamas delegation was set to arrive in Cairo on Monday evening, and it was expected to give its answer to Egypt regarding Israel's latest truce proposal on Tuesday.
"We have to wait and see what they have to say, and then we will announce as we find out," Zaki told the Post.
"We hope that they will agree, that there will be a tahadiyeh [cease-fire] again. We hope that the rockets will stop, that the siege will be lifted and that the crossings will open," he said. "We hope that a sense of normalcy will return to the Palestinian population in Gaza again."
But Zaki said there were a lot of things that could disrupt the delicate processes of trying to implement a truce and of bringing Fatah and Hamas together for reconciliation talks.
"There are negative elements and people who don't want this to happen, who don't want to see this process succeed," he said, declining to elaborate.
Since both Israel and Hamas announced unilateral cease-fires two weeks ago, rocket and mortar fire from Gaza have increased steadily. Israeli retaliation, including brief ground incursions and bombing runs aimed at rocket launchers and arms smuggling tunnels, is intensifying, military sources said.
The IDF said it was working on a response to the continued rocket attacks.
"We are waiting for the right time and target," a defense source said.
The army has been identifying new targets to replace the "bank" that was used and exhausted during Operation Cast Lead and is also trying to locate senior Hamas officials who could be targeted in response to the rocket attacks, the official said.
"Since the end of the operation, we are trying to replenish our bank of targets," a defense official said. "We will respond to the terror attacks from Gaza."
Among the responses being considered were air strikes and targeted killings of Hamas leaders, defense officials said.
The IDF ended its 22-day military offensive with the understanding that the rocket fire would stop and that action would be taken to stop weapons smuggling under the Philadelphi Corridor from Sinai, Olmert said.
Israel cannot afford to ignore the renewal of the rocket fire, he said.
Israel endured more than seven years of rocket fire from Gaza and "we will not go back to the rules of the game that the terrorist organizations tried to dictate in the past. We will act according to new rules," he said.
"An Israeli response will come at a time and place of our choosing. We will not warn the terrorist elements in advance as to how, where and when we will respond, but we will respond. This must be unequivocally clear," the prime minister said.
Hamas spokesman Taher Nunu said Olmert's threat was an attempt by Israel to "find false pretexts to increase its aggression against the people" of Gaza.
Hamas has not taken responsibility for the new attacks, which have been claimed by smaller armed groups. But Israel says it holds Hamas, which has ruled Gaza since seizing power in June 2007, responsible for all attacks coming from there.
Palestinians said residents near the Egypt-Gaza border received calls after nightfall on Sunday from the IDF advising them to leave ahead of Israeli attacks on smuggling tunnels. The military had no immediate comment.
Israeli aircraft flew over the area near Rafah, setting off sonic booms, and witnesses said hundreds of people who work in the tunnels there fled, along with residents.
Residents said tunnel workers were waiting in Rafah streets for the attacks to end so they could get back to their positions.
AP contributed to this report.

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